Student Default Rate Makes Sharp Rise

Student loan borrowers are defaulting at a much higher rate, according to a new study from the Department of Education. This is yet another testament to the bleakness of the job market, as well as falling graduation rates.

The Department of Education reported that the rate of default stood at 8.8 percent in 2010, up from the 7 percent in the fiscal 2008 year.

Student loan borrowers at for-profit colleges performed the worst in that group. For the roughly 1 million students whose first payments were due October 1, 2008, 15 percent were more than 270 days late on their payments by 2010. The group of students the year before them had only a 11.6 percent rate by comparison.

“We are disappointed to see increases in the cohort default rates for our students, as well as students in other sectors of higher education,” said Brian Moran, interim president and CEO of APSCU, the Association of Private Sector Colleges and Universities, which represents the for-profit sector as quoted in the Chicago Tribune . “We believe that the default rates will go down when the economy improves and the unemployment rate drops.”

For-profit schools have come under fire of late for their high default and dropout rates. For example, the University of Phoenix rate grew to 18.8 percent from 12.8 percent in 2008, and ITT Technical Institute saw its default rate skyrocket to 22.6 percent in 2010 from 10.8 percent.

Those types of numbers have made regulatory agencies question whether government funds should even be available to students of these college systems. So starting in 2012, in order to be able to continue in government financial aid programs, these colleges will have to show improvements in their three-year default rates.

One Response to “Student Default Rate Makes Sharp Rise”

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